Update: Week Ending March 15, 2014

The confusion has cleared this week. It is clear that the geopolitical issues we have been discussing for at least a couple of weeks have finally sunk in this last week. Crimea, Arab Gulf states, China-Japan, China-Philippines, Venezuela, and North Africa should have been enough to spook the markets, but the flight to safety seems to have accelerated towards the middle of the week.

Clearly this was a down week for the three indices I track. Yet, what makes this episode different than the consolidation-of-the-month affair, the last of which ended about five weeks ago, is that Gold (NYSEARCA:GLD) is appreciating, even on days that treasury rates are increasing, and treasury rates are falling even on days that the economic release are very bullish. This "break of logic" suggests that something else is at play; i.e. geopolitics!

Just for the record, the last correction was in the summer of 2011, and the last crash was actually the financial crisis whose end has just marked the fifth anniversary. Note also that the three indices notched high marks on the Friday of the week before.

The combination of all the above is quite worrisome to say the least. Will it be a consolidation, correction or a crash? Technical analysis are market following, but clearly Gold and Treasuries are sending a stronger message than what we saw in quite a while.

We shall see what this week brings, but this weekend should be pivotal. It is not clear what type of retaliation the West will attempt to inflict on Russia, but I am already seeing chatter relating to the certainty of both the secession and inevitable "consumption" of Crimea, as well as the sanctions to follow. This makes the first few days of the week pivotal in determining the depth of the financial market events that seem at this point certain to follow.

The economic numbers for the week (just ended) were quite fine, thank you! The only worrying number I saw was the PPI (Producer Price Index) which was unexpectedly deflationary.

For next week, we have a two-day Fed meeting which should include an economic update. It is not clear that this important event , the first to be conducted by Chairman Yellen, will amount for much considering the potential for paradigm-shifting geopolitical events transpiring earlier in the week.

In general, most sectors and issues in my trading set were punished, with the trend being more negative than the oscillator readings.

To conclude, the geopolitical overhang is something worth seriously watching, and possibly for more than just Crimea.

My regular table for the indices follows.

Index/ETF Symbol and Name

Daily 3-EMA-7

Weekly 3-EMA-7

Perceived Trend

SPX

S&P 500 Index

Positive

Positive

Negative

DJIA

Dow Jones Industrial Average

Neutral

Positive

Negative

COMP

NASDAQ Composite Index

Neutral

Positive

Negative

GLD

SPDR Gold Trust ETF

Positive

Positive

Positive

VIX

CBOE Volatility Index

Positive

Positive

Positive

FVX

CBOE 5 Year Treasury Note Yield Index

Positive

Positive

Neutral

TNX

CBOE 10 Year Treasury Note Yield Index

Negative

Neutral

Negative

TYX

CBOE 30 Year Treasury Bond Yield Index

Negative

Neutral

Negative

As usual, the reminder is that the movement of the treasury yields is negatively correlated with the price of the underlying instrument.

As for my trading set, my short term "Perceived Trend Oscillator" stood at a "neutral" of -25%, which was also the low of the week. This compares to a "bought" value of 40% on Friday. In essence, the geopolitical risk seems to have won over the improving economics.

The full trading set table is as follows.

Symbol and Company Name

Daily 3-EMA-7

Weekly 3-EMA-7

Perceived Trend

Is a Current Holding?

GERN

Geron Corporation

Negative

Neutral

Negative

Yes

JPM

JPMorgan Chase & Co.

Positive

Positive

Negative

GS

The Goldman Sachs Group, Inc.

Positive

Neutral

Negative

WFC

Wells Fargo & Co.

Positive

Positive

Positive

NLY

Annaly Capital Management, Inc.

Positive

Neutral

Positive

MO

Altria Group, Inc.

Positive

Negative

Neutral

T

AT&T Inc.

Negative

Negative

Neutral

VZ

Verizon Communications Inc.

Negative

Negative

Negative

GPS

The Gap, Inc.

Neutral

Positive

Negative

ANF

Abercrombie and Fitch Co.

Positive

Neutral

Neutral

JWN

Nordstrom, Inc.

Positive

Positive

Neutral

TGT

Target Corporation

Positive

Negative

Neutral

DIS

The Walt Disney Company

Positive

Positive

Neutral

MCD

McDonald's Corp.

Positive

Neutral

Positive

MDLZ

Mondelez International, Inc.

Positive

Positive

Neutral

BA

The Boeing Company

Negative

Neutral

Negative

LMT

Lockheed Martin Corporation

Positive

Positive

Neutral

CAT

Caterpillar Inc.

Neutral

Positive

Negative

DE

Deere & Company

Positive

Positive

Neutral

EMR

Emerson Electric Co.

Negative

Neutral

Negative

DOW

Dow Chemical Co.

Positive

Positive

Neutral

ADM

Archer, Daniels, Midland, Co.

Positive

Positive

Positive

MON

Monsanto, Co.

Positive

Positive

Positive

POT

Potash Corp. of Saskatchewan Inc.

Positive

Neutral

Neutral

PFE

Pfizer Inc.

Neutral

Positive

Negative

BMY

Bristol-Myers Squibb Company

Positive

Positive

Neutral

ABC

AmerisourceBergen Corporation

Neutral

Positive

Negative

AAPL

Apple, Inc.

Positive

Neutral

Negative

INTC

Intel Corporation

Negative

Positive

Negative

CSCO

Cisco Systems, Inc.

Negative

Negative

Negative

HPQ

Hewlett-Packard Company

Neutral

Positive

Negative

CVX

Chevron Corporation

Neutral

Negative

Negative

BP

BP plc

Negative

Positive

Negative

NGG

National Grid plc

Positive

Positive

Neutral

NI

NiSource, Inc.

Positive

Positive

Positive

WMB

Williams Companies, Inc.

Neutral

Positive

Negative

WM

Waste Management, Inc.

Negative

Negative

Negative

CNW

Con-way Inc.

Positive

Negative

Positive

CSX

CSX Corp.

Positive

Positive

Neutral

NSC

Norfolk Southern Corp.

Positive

Positive

Positive

Disclosure: It is important that you understand and agree that all information provided in this newsletter rely on publicly available data and tools with no guarantees of quality or suitability for any purpose, and that I can be long or short in any of my trading-set equities, at any time, with or without regard to indicated trends and described analytics, and that I do not give buy or sell or any other financial recommendations, and that any and all actions based on this commentary are solely the responsibility of the reader.

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